Encouraged by slightly improved buying, ginners could not check temptation and scaled up spot rate on Thursday, but fundamentals were not as bullish to allow prices to go berserk, during the week ended on October 30, 2004. Spot rate held unchanged at Rs 1975 initially but succumbed to not very valid reason and was added Rs 25 to Rs 2000.
WORLD SCENARIO: Cotton futures moved in narrow hand in New York, as players longingly waited for motivating news to determine direction. The spot December contract.
On the opening day futures finished largely softer on light speculative sales as the market stayed in tight hand while waiting for new to give it direction on its next move. A report by cotton expert said commercial accounts are bracing themselves for a sizeable drop in prices due to record supply that will engulf the US and world shortly.
On Tuesday futures settled mixed in activity featuring small speculators in dreary deal up with the market seemingly pinned in a band while waiting for news.
Analysts said small speculators were content to trade in a narrow band, content to job fibre contracts in a band especially given the paucity in news to give players much in the way of inspiration.
Brokers however noted that the only significantly activity was option related business by a commercial accounts engaged in buying puts and selling calls in the options ring.
On Thursday session closed with losses as trade kicked off automatic sell-orders although speculative short covering off the lows pared the markets loss. The market paid little attention to the weekly USDA export sales report. It said net upland cotton sales hit 72,500 running bales (RBs) versus trade belief it would range from 130,000 to 160,000 RBs. Last week sales hit 191,000 RBs.
The shipment USDA said booked orders hit 105,400 RBs, from 103,800 RBs last week might help stabilise fiber contracts.
Friday's session was mixed as speculative sales were offset by trade buying will players marking time ahead of the US elections in a few days time and release of several government reports.
A trader observed that prices looked like its wanted to move lower for now but futures could turn around and move north as outlook improves from around the middle of the coming week.
An analyst said he is convinced that the December delivery at 44.90 and 44.25 cents with resistance at 45.50 and 46.35 cents.
LOCAL TRADING: Stepped up buying by the exporters, textile millers and mid-week reports that rains and pest attack are poised to affect cotton negatively pushed prices higher during the week ended on October 30, 2004. Official spot rate was also following trend and had twice jumped to cumulative gains of Rs 65 to Rs 2040.
The usual rains and pest factor came to be rescue of ginners. The buyers were still on their planned shopping mood as prices still being within favourable limits. The rates in ready were ruling in the range of Rs 1900/2000 and in Punjab Rs 2000 to Rs 2050.
On the second day trading remained on firm lines. Neither spot rate nor rates in ready moved from their places. The rumours about like cause of price like, pest attack was heard in murmur. The sellers were coaxing and planning how to take advantage of reports about rains and pest attack.
However, spot and rates in ready were at the unchanged level. Statements and TCP presence were holding prices from and stable. The third day proved for the sellers too much who decided to raise the spot rate by Rs 25 to Rs 2000 without upcountry expenses. To add for to the fuel, news spread that TCP had been directed to immediately enter into export sales to stabilise the prices.
The growers were missing the government fixed rate of Rs 925. The pest report had prompted buying by the Textile millers and exporters. Sellers got the opportunities to revise spot rate by Rs 25 to Rs 2000.
The textile millers were serenely doing small buying on daily basis as they were not let alone. However, the most optimistic production figure at 15 million bales was extending buyers enough support.
The spinners and millers have been quite alert in view of the changed textile pattern in just two months time. The buying support was seen on Thursday and buyers' active owing to another rise of Rs 40 in the spot rate which took the rate to Rs 2040.
However, growers were yet to feel satisfied as they were still getting seedcotton price Rs 50/25 below the government fixed rate. A couple of big deals were noted which showed textile millers were rendered slightly unnerved due to rising trend in local cotton prices.
Fridays session saw modest business as those buy regularly showed no activity. Official spot rate was unchanged at Rs 2040. Seed cotton rate still hankering ginners pay the fixed amount. However buying support is being extended and supplies appear coming with faster pace.
On Saturday's some deals were reported at following rates as the spot rate was reduced by Rs 25 to Rs 2015 without upcountry expenses. The New York cotton futures moved both ways.
TCP TO LOSE: What it is a lament or reminder that money TCP was spending on cotton purchase was intrinsically tax payers' reports have been trying to inject new life into a dead horse.
In a recent eye opener report TCP has been cautioned it was buying cotton at much higher than ruling market rate. A report said TCP was buying lint from ginners at higher rate than it will be able to sell.
The current world rate is reported at 42 cents a pound. The report quotes cotton was being sold at Rs 1800/2000 per maund. But TCP was acquiring at Rs 2159, the differential was stated to be whooping. When TCP had finally lowed to govt directive it was said price fixation would be weekly. It was so decided to save TCP from fluctuations that could at times hit TCP hard. But the ginners had at the very outset had almost rejected the price for being in their view very unrealistic. Anyway, despite early exchange of between the TCP and ginners, TCP is apparently carrying on its job without much fuss.
The TCP is reported to have entered into contract to buy 250,000 bales of cotton. According to estimates TCP has already spent nearly Rs 2.5 billion. If PM's order is to be carried out by the TCP will have to buy in all one million bales needing Rs 10 billion.
However PM is mindful of TCP setback and has asked TCP to start export of 100,000 bales out of 250,000 bales immediately. A more recent report said export to BD, Taiwan, Indonesia, Far East has begun.
The textile millers have shown determination not to import if country's production will watch mills requirements even upto 13 million bales. Some agencies are also projecting cotton production at 13 million bales.
The question, however is whether TCP will be able to end up without sustaining losses will be great day.
The latest is that commerce ministry has authorised TCP float tender for export of 20,000 bales of cotton, the first consignment to be shipped. Chairman TCP also informed that TCP has contracted from Sindh and Punjab to buy 360,000 bales. But doubts continued to be expressed whether TCP will be able to ship cotton abroad and earn any profit!
DREADED 2005: Not all big names in textile and fabrics producers are scared of January 1, 2005, and beyond, when world trade will go globalised. Only such products will survive as he acceptable to buyers.
Obviously it means that competitive price and quality products will stay on board and the rest will remain afloat. The country to stay with chins high will be China.
Some countries have pleaded China should continue to be restrained from enjoying the free trade system beyond 2005. China is reported to have expressed itself to be left to operate as it is today.
What makes China so daring: Sell products at most competitive price and belief in producing variety and more and yet more. These two combined act as the best salesmen which yields in phenomenal profit, which alarm the people of the most advanced countries. China's so success story is their perception of clients and patrons packets.
The post 2005 year most fearful countries are not the poor countries where generally untrained and unskilled workers produce the exportable products but most sophisticated and technologically advanced countries like US, and the EU.
These countries will pay for the advanced technology and for paying workers high wages and pay packets. In fact, in America textile industry is already on the gradual wane. Pakistan is gainer from the textile industry in decay in the US as textile millers are obliged with second hand machinery.
In Europe, most particularly Italy and Portugal have apprehensions because ten times more payments to their worder cannot contest with Chinese or other Asian products.
However, Europe is tightening its belt to know the trend in countries where their products were welcome for brand, design and fashion. The January 2005 is not very far off. Readers hold your nerves to witness upset in many countries considered leaders under protectionist system!
TAIL PIECE: The spinners and textile millers must have patience to bear the another rise of PSF third consecutive rise. This time the hike is highest at Rs 4 per kilogram. The cause has been given as rise in raw material prices that make the PSF.